The world average crude oil spot
price peaked at $137/bbl in July 2008. Just a year earlier, the
same spot price had hovered at around $70/bbl - almost 50%
lower (Figure 1). This massive peak in prices sparked
a flurry of oil exploration and drilling activity, the impact
of which reverberated through the industrial minerals world
(IM July 08, p.23: Oil cloud yields mineral
Industrial minerals are the source
of numerous oilfield materials, aiding activities such as
drilling (barytes, bentonite, calcium carbonate, graphite,
haematite, mica, soda ash, vermiculite), well hole cement
(kaolin, zeolite), and oil extraction (proppants - silica
sand, bauxite, kaolin).
Although advances in drilling fluid
technology are leaning toward increased use of chemicals and
additives, industrial minerals still play a pivotal role in the
oil and gas industry - particularly those used in the
manufacture of proppants (see p.38: proppants at a
Figure 1: World average
crude oil spot price, 1990-2009
Weekly all countries spot price (FOB, $/barrel)
weighted by estimated
export volume. Data includes period between 5 January 1990 to 2
Source: US Energy Information Administration
Propping agents, or proppants, are used to aid extraction of
oil and gas from reservoir rocks. During a hydraulic fracturing
treatment, engineered fluids (including water, chemicals and
proppants) are injected down the well via powerful hydraulic
pumps. As pressure builds up in the well, the surrounding
reservoir cracks, and it is into these fractures that the
proppants must migrate and prop open (Figure 4).
Together, the fractures and proppants act as a horizon of high
permeability; facilitating the movement of oil and gas from the
reservoir rock into the wellbore.
The use of proppants is especially
crucial in the recovery of oil and gas from moderate to deep
wells, as the proppants used must be able to withstand the high
(10-14,000 psi) pressures encountered in these
Figure 2: Global proppant
Around 14,500m. lbs of proppants were produced in
to approximately 5,000 lbs in 2000. In this period, market
in favour of ceramics over frac sand by around 5%.
Source: Adapted from CARBO Ceramics
Figure 4: Hydraulic fracturing steps
Proppant usage began to decline at
the end of 2008 - in tandem with falling oil prices and
the economic recession Ð and has remained at lower levels
throughout 2009, generally reflecting oil and gas drilling
Perry Fischer, editor of World
Oil, summed up the drilling market, commenting: The
global oil market will be off by around 5-7% this year in terms
of drilling activity, but the US oil market will be
worse - probably around 20% off.
Gas is not yet a global
market, but the North American gas market is way off - at
about 50% in drilling terms - which is a situation that
cannot last due to an across-the-board average 30% depletion
rate, Fischer explained.
Fischer told IM
that in terms of exploration - although most places in the
world are very mature - very few locations have been
exploited at depth.
At greater drilling depths,
say, 12,000 to 15,000 ft and deeper, everywhere is
underexplored - even very old areas like Texas [USA].
Africa still has some shallow underexplored areas, and there
have been some world class finds in Uganda, for
In general though, its
the deepwater areas such as the Lower Tertiary in the US Gulf
of Mexico, the per-salt depths in Brazils Campos Basin,
and the whole of West Africas deepwater that will remain
where most of the exploration dollars are spent, Fischer
Given the location of most of the
exploration and drilling at present, it seems inevitable that
this will be reflected in the demand for certain types of
proppant (see 38: proppants at a glance). This has
already been witnessed over the past decade or so as production
from hotter, deeper reservoirs has steadily increased demand
for stronger, more crush resistant ceramic and bauxite
Robert Baylis, senior analyst at
UK-based Roskill Information Services, told
IM: The complexity of wells is
increasing , and the wells themselves are getting deeper and
reaching higher temperatures.
This demand, said Baylis, has
caused some sourcing problems for proppants producers:
Theres an obvious shortage of adequate bauxite
grades, with most of the Chinese material meeting refractory
specifications. There is also a lack of abrasive grade material
outside of China, and proppants producers are probably
struggling to source material.
Although fracturing (frac) sand
remains the most widely used proppant type Ð accounting for
around 70% of the market, according to industry sources -
its market share has fallen slightly in recent years
(Figure 2). However, it is worth noting that during
this time the price of oil, in particular, warranted the use of
more expensive proppant types.
Murray Lines, director of minerals
market consultancy Stratum Resources, told IM:
Frac sand - including resin-coated sand - will
continue to grow steadily [once the market recovers], but
ceramic proppants, including pisolitic bauxite-based grades,
will grow even faster.
The development of
lightweight ceramic proppant with high crush
strength has had one of the biggest impacts on the
proppants market in recent years, according to Daniyel
Firestone of USA-based ALMA International Inc., which
specialises in the manufacture and distribution of a wide range
of industrial media.
Depressed [oil and gas]
prices make it impossible to use expensive ceramic proppants
[at present], Firestone told IM.
However, there are new, less expensive proppants being
developed by more companies, which increases the options and
also the competition. Firestone expects these factors to
drive down proppant prices.
Yixing Orient Petroleum Proppant
Co. Ltd echoed this opinion, telling IM:
There is still much room for the development of ceramic
proppants, and we are confident about its future.
Although the company is positive
that the market will see further development of ceramic
proppant products in the future, it warned: As we all
know: no demand, no market.
Because of the impact of the
economic crisis, the development of the market has been
hampered, Yixing Orient explained. However, the
situation is going to pick up in 2010. Its expected that
demand will rise 20-30% on the basis of 2009 levels.
Yixing Orient, formed in 1986,
operates two plants in Yixing City, located in Jiangsu
province, eastern China, with a production capacity of 100,000
tpa (around 220m. lbs/year). The company is believed to be the
largest producer of ceramic proppant in China, and claims it is
third largest in the world, with a domestic market share of 95%
and 15% of the worlds ceramic proppant production.
Bauxite is the raw material
of ceramic proppants and demand for it will be larger in the
future than it is now, Yixing Orient told
IM. At the present time, more and more
[proppants] factories are building, and the competition will be
Visiting geologist reviewing quartzite in drill core
at Stikines Nonda Project, October 2009.
Courtesy Stikine Gold Corp
Frac sand demand
Competition is also fierce in the
frac sand supply chain, where it is becoming increasingly
difficult to find silica sand deposits that meet the stringent
specifications set by the American Petroleum Institute (API).
The APIs standards constrain the values for a number of
proppant properties, including crush resistance, roundness,
sphericity, and size.
Sands suitable for fracing must be
sourced from high silica sandstones or unconsolidated deposits,
well rounded, relatively clean of other minerals and
impurities, fine, medium to coarse grain, and mineable (IM
January 07, p. 58: The facts of frac).
During the period of peak oil
prices in mid-2008, frac sand supply was in considerable
demand. In North America, where numerous silica sand deposits
exist, demand for oil and gas sparked a flurry of capacity
increases, from major producers such as U.S. Silica Co. (USS)
and Unimin Corp.
One of the worlds leading
frac sand producers is USS, headquartered in Berkeley Springs,
West Virginia. USS has an overall frac sand capacity of 1.5m.
tpa and produces a number of grades at plants across the USA,
including Columbia, South Carolina (grades 12/20-20/40 mesh);
Dubberly, Louisiana (40/70); Jackson, Tennessee (40/70), Mill
Creek, Oklahoma (100 mesh); Ottawa, Illinois (20/40-40/70); and
Pacific, Missouri (40/70-100 mesh hybrid). Additionally, USS is
evaluating process changes at its Pacific plant to make a spec
40/70; the evaluation will be completed in early 2010, the
company told IM.
USS owns >130m. tonnes of the
high quality St Peters sandstone reserves in Ottawa, and
in June this year the company announced plans to expand its
frac sand capacity at the Ottawa facility by 500,000 tpa,
through the construction of a new processing facility (IM
25 June 2009: U.S. Silica ups frac sand capacity).
John Ulizio, chief executive
officer of USS, explained: Ottawa frac sands are the
premier frac sands, and we wanted to meet the frac sand market
demand for premium northern white API specifications 20/40
through 40/70 frac sand.
The most widely used frac sand
grade is 20/40 mesh, comprising silica sand grains 0.84-0.42 mm
in size. Although the market for proppants has been deflated
somewhat throughout 2009, Ulizio explained that the expansion
would give USS the ability to add more capacity when
market conditions warrant it, and the ability to make an API
spec premium 40/70 frac sand at Ottawa.
Figure 5: Drilling market
(land and offshore), September 2009
Hydrocarbon drilling hotspots of September 2009,
indicating the active drilling rig count
(land and offshore) and percentage change on September
Source: Drilling rig data courtesy M-I Swaco
Another of the USAs biggest
frac sand producers is Sibelco subsidiary Unimin Corp., which
produces frac sand at its operations in Guion, Arkansas. In
April this year Unimin announced that it would increase
production at the site by 700% - a move that would see
capacity grow by an additional 250,000 tonnes.
Unimin said the expansion was in
response to market demand for more 40/70 frac sand, a type
commonly used in the shale reservoirs of the Fayetteville,
Haynesville and Barnett basins, where gas is extracted.
Unimin was aiming to complete the
expansion by the end of 2009, but the latest estimate from the
company puts the project completion at end-Q1 2010.
New frac sand
The flurry of frac sand activity
over the past two or so years has not been restricted to
existing operations. Indeed, several exploration companies
looking to develop North American frac sand have attracted a
lot of attention - perhaps the most viable of these being
Stikine Gold Corp. and Victory Nickel Inc.
Canadian exploration company
Stikine is developing a large quartzite deposit - the
Nonda frac sand project - located in British Columbia,
In mid-October 2009 the company
received the first results from its initial drill programme at
the site, which involved nine drill holes along 2.2km of the
>11km strike length deposit. All holes were collared in and
ended in quartzite, with hole depths ranging 70-168 metres.
Scott Broughton, president and
chief executive officer of Stikine, said of the drill results:
We wanted to prove to the market that we had a massive
quartzite resource. We tested over 2km strike of the deposit
and found that the material was very consistent.
Broughton told IM
that the next step for the company would be to conduct large
scale bench tests on the Nonda material, for which Stikine
collected around 2 tonnes of material, in order to determine
Stikine also plans to submit the
quartzite to a number of certification labs and potential
customers . We hope to get the results back from that in
2-4 weeks, Broughton said.
The potential of the Nonda frac
sand project is good, as there are a number of gas companies in
the British Columbia area - focused particularly in the
Horn River Basin - that will require higher volumes of
proppant as they progress to full production.
Our agenda is to begin
production by the time the Horn River Basin gets into its
stride - in 2-3 years time, Broughton
explained. There are eight or nine companies in Horn
River and we want to supply all their needs. At the moment
thats only about 300-400,000 tpa of frac sand, but in the
next couple of years that could grow to 2-4m. tpa.
Although originally a
metals-focused company, Stikine was inspired to develop a new
Canada-based frac sand supply after learning how much the
British Columbia gas companies were paying for the proppant.
Certainly, the Nonda project is a positive development for
these companies, many of which have been transporting frac sand
in from the USA.
We could make the Horn River
Basin gas more competitive, Boughton said. In turn,
that would help to secure a clean energy source for North
America and reduce its reliance on imported energy.
Another frac sand developer to have
gained attention in recent months is Canadian exploration
company Victory Nickel Inc., currently developing the Minago
nickel deposit - which also has a significant frac sand
resource - in Manitoba, central Canada.
The Minago frac sand resource, a 10
metre thick sandstone layer, was discovered by Victory after it
was found to be overlying a nickel deposit that the company is
Paul Jones, vice president of
exploration for Victory, told IM: In
Manitoba youre exposing the frac sand layer to get to the
nickel deposit. The sand perhaps wouldnt be feasible as a
standalone project as you also have around 70-80 metres of
limestone to get through first.
In September, the company revised
its frac sand estimate at the Minago site, raising the amount
of marketable frac sand from 4m. tonnes to 12.6m. tonnes. In
its revision, Victory noted: Its important to
remember that the sandstone layer is not confined to the Minago
pit area, and that this resource estimate doesnt consider
the potentially significant additional tonnage of frac sand
that exists outside the open pit limits and which could
conceivably be mined using conventional underground mining
Victory believes demand for high
quality frac sand should continue to expand, driven by the
development of unconventional oil and gas resource plays -
such as the shale-gas developments in the Montney and Horn
River regions of north-east British Columbia.
In Canada theres a lot
of exploration for gas right now, and it looks like demand for
frac sand from those companies alone could require around 2m.
tpa of proppants during the next few years, Jones told
In North America the proppants
market is generally tied to natural gas production. While
prices for US gas have been staggeringly low recently (around
$3-4), they are now beginning to rise Ð something both
proppants producers and gas companies will be relieved
Companies cant really
tolerate gas below $6, especially in the shale plays, so many
of those with significant shale gas exposure are trying to stay
alive through cash flow, but even that wont allow them to
survive long at current prices, Fischer of World
Oil explained. I think well see gas rise above
$6, probably within the next 6 months. Either that or there
will be a wave of consolidation.
As with most industrial projects,
the development of the North American shale plays will depend
on profitability returning to the gas market; at present, it
seems the expense of shale gas development is simply not
sustainable in the face of low industrial demand.
But, at some point, gas prices will
rise, and with it so will proppant demand. However, industry
sources predict that the development of shale plays will see a
return to gel fracing over water fracing: In shales
fracing is needed of course, but the problem with these wells
is the gas production depletion rate - which is
atrocious, one source said.
Another energy source that
proppants producers may have been eyeing up is coal bed methane
(CBM), a source of gas which is extracted from coal deposits.
According to industry sources, CBM is more stable than shale
gas plays; but its one major wildcard is de-watering.
CBM wells need to be dewatered,
though not necessarily fraced. The cost of pumping, treating
and disposing of the water is the biggest unknown, particularly
regarding how long the dewatering process has to continue. This
contrasts with shale gas where the water issues lie on both
sides of the development process Ð finding the 2-8m.
gallons of water needed for each frac job, plus disposing of
the produced water.
These water issues come at a time
when the effects of hydraulic fracturing on ground water are
being closely scrutinised, particularly in the USA.
The FRAC Act
In the USA, a potential roadblock
to the recovery of the oil and gas markets is a piece of
legislation that seeks to further regulate hydraulic fracturing
in the country. The Fracking Responsibility and Awareness of
Chemicals Act (FRAC Act) is a proposed amendment to
the Safe Drinking Water Act that, if successful, would
place further restrictions on fracing and force oil and gas
companies to disclose the chemicals used during drilling.
Our legislation says everyone
deserves to have safe drinking water by ensuring that hydraulic
fracturing is subject to the protections afforded by the Safe
Drinking Water Act. The bill also lifts the veil of secrecy
currently shrouding this industry practice, commented US
congressman Maurice Hinchey.
But in a recent press release, the
American Petroleum Institute dismissed these concerns, stating:
Hydraulic fracturing is a safe, proven, 50-year-old
technologyÉ More than one million wells have been
completed using this technology. Unnecessary additional
regulation of this practice would only hurt the nations
energy security and threaten our economy.
Although proppants themselves are
not classed as chemicals, and would not be regulated under the
FRAC Act, any legislation limiting the oil and gas
drilling market - particularly in an important oil and gas
producing country such as the USA - would have
repercussions for the material and its producers. As it stands,
the real questions regarding the proposed FRAC Act is
not whether fracing will be regulated (as it already is), but
rather who will regulate fracing and how?
At the moment hydraulic
fracturing is a motley quilt of state regulation. If HF came
under federal regulation, that wouldnt necessarily be a
bad thing, its just an unknown; and business generally
would rather work with the known status quo than deal with
unknown future regulation, said Fischer of World
In a time of the utmost uncertainty in economic and market
terms, an additional unknown is the last thing the
Proppants at a
Proppants, or propping agents, are
an important material used to aid the extraction of oil and gas
from reservoir rocks. There are three main types of proppant:
ceramic (comprising sintered bauxite, alumina,
kaolin), fracturing sand (a type of silica
sand with well constrained characteristics), and
resin-coated proppants (ceramic and sand).
Ceramic proppants can be subdivided
into three groups: lightweight, intermediate density, and high
density. As the density of a ceramic proppant increases, so
does its alumina content and strength Ð but also cost.
proppants are the most widely used of the ceramic
family and are aimed at the largest well population. They have
a similar bulk density and specific gravity to frac sand, but
have a high conductivity and are chemically inert. Lightweight
proppants tend to be used for oil extraction from fairly
shallow wells, and can withstand pressures up to 7,000 psi.
With a higher alumina content,
intermediate density proppants tend to have
good crush resistance and are usually effective at pressures of
up to 10,000 psi. They are usually selected for wells with a
moderate depth, to aid extraction of oil and gas.
High density ceramic
proppants are usually manufactured from sintered
bauxite, which is derived from the abrasive grade of the
mineral. Abrasive grade bauxite is otherwise predominantly used
to produce abrasive- and refractory-grade brown fused
During manufacture the bauxite is
milled, agglomerated into small spheres, and then sintered at
temperatures of 2,000ºC. The resulting product has a good
roundness, sphericity and strength, and is particularly in
demand for gas extraction from deep well settings (10-14,000
Fracturing (frac) sand is a form of
silica sand with well constrained size, roundness and
sphericity characteristics. It is traditionally divided into
two types - white sand, and brown
The standard for white sand is
generally accepted to be the St Peters sandstone, which
is found throughout Ottawa in Illinois, USA, in large deposits.
The St Peters sandstone, which was used during early
development of hydraulic fracturing testing, has continued to
be mined for frac sand, as it comprises well rounded grains
that meet crush resistance tests and American Petroleum
Institute (API) standards (IM January 07, p.59: The
facts of frac).
Meanwhile, brown sand has
traditionally been sourced from the Hickory sandstone found
near Brady in Texas, USA. Brown sand is polycrystalline
(comprising multiple crystals bound together), and is weaker
than the monocrystalline white sand.
API RP60 - proppant
Source: Redrawn from Stratigraphy and
Sedimentation, Krumbein and Sloss
In the mid-1970s the oil and gas
market saw the development of the first resin-coated sand
proppants. Although resin does not increase the strength of the
sand, its role is nonetheless vital. By applying resin, the
sand pack can be consolidated and the risk of proppant
flow-back is reduced. Further, when the sand grains fail and
crush under pressure, the resin coating prevents individual
fines from escaping. Resin-coating can also improve the
distribution of stresses applied to the sand downhole.
The development of lightweight and
ultra lightweight ceramic proppants has seen more research into
coating porous ceramic proppants. The ceramic proppant is
underfired during manufacture, producing internal or external
porosity which can be preserved by coating the proppant with
resin. Although this produces a lightweight ceramic proppant,
underfired products are weaker than traditional ceramic
proppants. As with frac sand, applying resin to the proppant
also reduces the risk of proppant flow-back.
The API has a number of
specifications for proppants which the industry uses as a
guideline for factors such as crush resistance, roundness and
sphericity, and the amount of fines allowed above and below the
specific mesh size. These factors all affect conductivity or
the proppant pack.
Proppant size is measured using
ASTM Internationals (formerly American Society for
Testing and Materials) sieve series, which is based on the
fourth root of two Ð whereby every fourth screen represents
a doubling of particle diameter.
API requires that a minimum of 90% of the specific proppant
size should fall between the designated sieve sizes. Not more
than 0.1% of the total tested sample should be larger than the
first sieve size, and not more than 1% should be smaller than
the last sieve size (Table 1).
Table 1: ASTM sieve series
||Sieve opening (inches)
||Sieve opening (mm)
Per API specifications, 90% of
through the top screen and is caught on the
bottom screen. Up to 1% is permitted to fall on
the second screen below bottom. Arrows indicate
material falling between the 30/50 mesh API
Source: ASTM International
The worlds leading ceramic proppants producer is
USA-based CARBO Ceramics, which operates six plants - one
in China, one in Russia, and four in the USA. CARBO produces a
range of ceramic products, including ultralight, lightweight,
intermediate density and high density proppants.
CARBOs biggest competitor is
Saint-Gobain Proppants (SGP), a subsidiary of
the French glass producer Saint-Gobain. In 1989 Saint-Gobain
acquired proppants producer Norton Co., and in 2004
Nortons name was changed to SGP. The company produces a
number of ceramic and sintered bauxite proppant types.
Another leading bauxite proppant
company is Brazilian bauxite producer Mineracao
Curimbaba Ltda, whose exclusive distributor in Canada,
Mexico and the USA is Sintex Minerals & Service
Inc. Curimbaba owns more than 250 bauxite mines which
together represent reserves of around 300m. tonnes.
In Russia, a major ceramic
proppants producer is JSC Borovichi Refractories
Plant, which has been manufacturing proppants under
the trade name BorProp since 1998.
The market for ceramic proppants
has grown steadily in Asia over the past few years, and
Yixing Orient Petroleum Proppant Co. Ltd is
believed to be the biggest producer in China, with a capacity
of 100,000 tpa. Also in China, an emerging bauxite proppants
producer is China Gengsheng Minerals Inc.,
which has won a number of high profile contracts this year with
companies such as China National Petroleum Corp., and
PetroChina Co. Ltd.
Frac sand: One of
the worlds leading frac sand companies is USA-based
U.S. Silica Co., owned by private equity group
Golden Gate Capital. The company has a frac sand capacity of
1.5m. tpa, which is shared between six plants throughout the
USA. The companys principle site is in Ottawa,
US company Superior Silica
Sands LLC produces 20/40, 40/70 and 100 mesh fractions
of Ottawa-type frac sand. This year, Superior entered into a
partnership with fellow US company flexFrac Proppant
Frac Sand Suppliers, a frac sand producer with
operations in Wisconsin and Texas.
Fairmount Minerals subsidiary
Santrol also produces Ottawa-type sand, and
resin-coated products. Fairmounts frac and gravel pack
sand processing capacity is over 400,000 tpa, and the company
claims to have enough mine reserves to supply Ottawa sand for
the next 80 years.
Proppant prices and
Recent prices for bauxite proppants
have been estimated at $0.45-0.50/lb, while ceramic proppants
levels are thought to range $0.40-0.45/lb, and frac sand around
One industry source said:
Some companies are reporting prices as low as $0.20/lb
for lightweight proppants.
Another ceramic proppant producer,
meanwhile, estimated prices for medium density high strength
ceramic proppant to be close to $460/tonne ($0.21/lb).
Ceramic proppants are estimated to hold around 20% of the
overall proppant market at present, while frac sand accounts
for 70% and resin-coated sand accounts for around 10%. Of the
three types, frac sand is the cheapest.
Figure 3: Market share by
proppant type, 2007
Approximately 14,500m. lbs of proppants were
produced in 2007, divided between frac sand (~70%),
ceramic proppants (~20%) and resin-coated sand (~10%).
Source: Industry sources